Every fall, the Social Security Administration makes an announcement that has a major impact on the 66 million people who receive benefit checks. The annual inflation adjustment is aimed at keeping seniors from losing purchasing power.
The Social Security Administration bases its cost-of-living adjustment, or COLA, on the inflation rate during the third quarter, or July through September. The agency this year announced its 2023 COLA of 8.7 percent. This translates into an average monthly increase of $144.10, boosting the typical benefit from $1,658 to about $1,802 per month.
Given this increase, if you are nearing the age of 62, you may be wondering if you should start drawing your social security benefit sooner than later. Deciding when to begin taking Social Security is one of the most important retirement decisions you can make. You can start collecting as early as age 62, but your benefits will be reduced by as much as 25 percent to 30 percent from what they would be at your “full” retirement age (see the table on the right). Conversely, your benefit is increased by an annual rate of 8 percent if you delay taking benefits between your full retirement age and age 70.
Sometimes circumstances require people to begin taking benefits as soon as possible. But if you’re thinking about retiring early and receive sufficient income from your retirement accounts, a traditional pension plan, and/or other sources, then you can be more flexible about when you begin taking benefits.
Another important factor to consider is your life expectancy. Regardless of when you begin taking benefits, Social Security is designed to pay you the same total amount over the life expectancy of everyone the same age as you. Because almost half of all Americans are expected to live longer than their life expectancies, taking higher, delayed benefits might make sense for you. If you’re in good health and your parents lived beyond their life expectancies, then you too might live beyond yours.
Married couples should also consider their ages and health when deciding the time to start taking their personal Social Security benefits, especially if one spouse earned more than the other. Under certain circumstances, the amount of Social Security survivor benefits for a lower-earning spouse could exceed his or her personal benefits. In such a case, the surviving spouse can elect to take the higher survivor benefit. To learn more about maximizing your benefits, or the benefits of you and your spouse, visit ssa.gov/retire/estimator.html or aarp.org/socialsecuritybenefits.
Deciding when to begin Social Security can be quite complex. You should sit down with your financial advisor to help determine the best time to start taking your benefits. Ideally this would be before you or your spouse reaches age 62, the age at which you can begin collecting benefits.
Your Full Retirement Age
Your full retirement age is based on your birth year and is the age at which you’re eligible to receive full Social Security Benefits.
YEAR OF BIRTH FULL BENEFIT AGE
1937 or earlier………………………………………………. 65
1938……………………………………………………………. 65 and 2 months
1939……………………………………………………………. 65 and 4 months
1940……………………………………………………………. 65 and 6 months
1941……………………………………………………………. 65 and 8 months
1942……………………………………………………………. 65 and 10 months
1943-1954……………………………………………………. 66
1955……………………………………………………………. 66 and 2 months
1956……………………………………………………………. 66 and 4 months
1957……………………………………………………………. 66 and 6 months
1958……………………………………………………………. 66 and 8 months
1959……………………………………………………………. 66 and 10 months
1960 or later…………………………………………….. 67
Source: Social Security Administration
Provided by Ed Wettig, CFP, Cornerstone Financial Planning Group, which offers investment management, financial planning and retirement income strategies. Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA 93013, 800-874-6910. Cornerstone Financial Planning Group and PlanMember Securities Corporation are independently owned and operated. PlanMember is not responsible or liable for ancillary products or services offered by Cornerstone Financial Planning Group or this representative.
